Disclosure: I have no financial interest in any financial services companies. Further, I have said previously that I do not favor re-imposing Glass-Steagall as a magic bullet solution given that most financial carnage over the past twenty-five years has originated in the regulated commercial bank sector. Like Dimon and Bair, I see a robust regulatory regime as critical. On the other hand, I am generally in favor of reducing bank size, unlike Dimon.

A more robust solution would incorporate multiple tools to prevent and painlessly resolve large bank failures.

First, split the TBTF “banks” into two institutions–real lending/savings banks and capital investment/trading companies. Protect depositors in the former; don’t protect investors in the latter.

Second, to the extent then that true TBTF bank exist, split them into non-threatening pieces by any of a number of criteria (geography, deposit base, etc.)

Third, tighten regulations on the banks, including capital requirements, and massively expand transparency on investment/trading houses–and the Fed. Expand federal (FDIC, Fed, SEC) auditing authority on all,

Fourth, establish robust resolution procedures per Dimon & others.

In the end, these could all fail, but the chances that they would prevent or quickly & less painfully rectify a financial crisis are much better than relying on resolution to solve the problem.

“Jamie Dimon. It is clear that Dimon believes JPMorgan Chase was never in any real jeopardy during the financial crisis.”

Table 3: $87,000,000,000,000.00 (87 trillion) in off balance sheet derivatives. http://www.occ.treas.gov/ftp/release/2009-34a.pdf